Management Audit

A measurement and report of the effectiveness and results of certain business procedures. Management audits are usually performed internally, and check to see that procedures have their intended effect. Unlike a compliance audit, which simply ensures that procedures are being followed, management audits challenge the assumptions and goals of procedures, with an eye toward improving efficiency. A management audit may recommend changes in procedures resulting from observed inefficiencies in existing procedures. A detailed audit that concentrates on analysis and evaluation of management procedures and the overall performance of an organization. A management audit is undertaken to discover weaknesses and to institute improvements within the organization.

The management audit is a more recent concept. It focuses on results, evaluating the effectiveness and suitability of controls by challenging underlying rules, procedures and methods. Management audits, which are generally performed internally, are compliance audits plus cause-and-effect analysis. When performed correctly, they are potentially the most useful of the evaluation methods, because they result in change.

A management audit can be defined as an audit which analyzes the effectiveness of the management team of a company. The purpose of this is seven-fold: understand current practices, relate these to company financials, suggest new procedures which will improve the efficiency of managers, present a financial gain related to these new procedures, and create benchmarks and projections for the future. A management audit letter is the final piece of material shared with the client; it is a report of the findings.

The management audit process can be explained by the auditing of both the management method as a whole as well as key management staff. This is important to establish the effectiveness of both the leaders of the department as well as how it performs as a team. In this way, it can fill the purpose of a staff audit or performance audit, depending on the scope of the company.

Audit management oversees the internal/external audit programs, and hires and trains the appropriate audit personnel. The staff should have the necessary skills and expertise to identify inherent risks of the business and assess the overall effectiveness of controls in place relating to the company’s internal controls.

Internal audit is a function setup within the organization to reduce the risk of fraud in the organization and runs according to the management commands. This is the main difference between internal and external audit where external auditors are independent of management and hence external auditors give an opinion on the financial statements as presented by the management of the organization.

Analysis and assessment of competencies and capabilities of a company’s management in order to evaluate their effectiveness, especially with regard to the strategic objectives and policies of the business. The objective of a management audit is not to appraise individual executive performance, but to evaluate the management team in relation to their competition. Management audits are often necessitated by major changes in a business. Some of the events that call for a management audit are top management changes, mergers and acquisitions, and succession planning.